How To Get A House For Free

Even in today's depressed housing market, you might have trouble scrounging up the $10 to buy a somewhat functioning house. (Pro tip: if you're going to exchange one Alexander Hamilton for a house, put at least two bucks down so you can avoid having to pay private mortgage insurance. That could easily add another 18 cents to the price of the house.)

Fortunately, there's a way around this whole business of exchanging your hard-earned money for a house. Depending on the circumstances, you can own a house for free - no inheriting or auctioning involved. It's not a government program, it doesn't involve threatening the existing owner's family and it's all perfectly legal. (To learn why the housing market changes so dramatically, read Why Housing Market Bubbles Pop.)

Just live there for a few years without the owner knowing and/or caring. Simple, huh?

Come on, you're joking. Not at all. In fact, if the registered owner of a property challenges the ownership claim of someone who has lived there right under the registered owner's nose, the courts will rule with the resident every time (assuming he follows some other simple conditions that we'll get to in a second.)

Why would the government write laws ordering the owner of a house to give it up to squatters? Didn't we fight a war with England over this? Well, first of all the law doesn't use the inelegant word "squatters." Instead, if you squat you're called an adverse possessor. But don't get too excited: adverse possession doesn't mean that you can wait until your rich neighbor leaves for a vacation, move in, change the locks and have your mail forwarded. There's a little more to it than that.

The rationale behind taking property from a taxpaying owner and giving it to a seemingly larcenous tenant is that every piece of land should enjoy its best possible use. With an absentee landlord who never visits, nor even has a representative keep an eye on the place, a property on an otherwise clean and tidy street could be covered in unkempt weeds and graffiti or worse. The neighbors' property values thus decrease, and the owner of the ignored property is negatively impacting the neighbors by his negligence.

As far as real estate case law is concerned, at least whoever's living there cares enough about the place to live there. That's more than you can say about an absentee owner. But again, we're talking about an absentee owner; someone who pays no attention to the place and hasn't for a long time.

How long a time? It depends on the state. In Nevada, an adverse possessor has to live on someone else's land for at least five years before he can claim it as his own. In Hawaii, it's 20 years. Most states range from 5-30 years.

However, there's more to adverse possession than that. You can't build an underground tenement on one corner of the property and only come and go under cover of darkness. Every state requires that you live there openly and notoriously. Also, your living there has to be continuous and uninterrupted. So if your aforementioned rich neighbor goes to the Bahamas every winter, you can't move onto his house for 15 consecutive winters, return home every spring, then go down to the county assessor's office and claim his place as your own.

Sounds pretty clear in theory, but does it ever happen in real life? You bet it does. In 2007 a Boulder, Colorado couple let their land sit unused for well beyond the state's 18-year requirement. Their neighbor - and let's ignore for a minute that the neighbor was not only a judge, but the city's former mayor - laid claim to the couple's prime tenth of an acre. The courts ruled in the ex-mayor's favor, and the couple had nothing but tax bills to show for the site of their would-be dream home.

The Bottom LineIf you're uncommonly determined, you can take adverse possession of a property, have all the contingencies break in your favor, and hope the current owner never gets wise within the prescribed period. But for most of us, it's easier to just shop for houses the old-fashioned way. (To help you in your quest to buy a home, see Are You Ready To Buy A House?)